You can take your pick from multiple kinds of annuities that are available these days. Picking the right ones can be quite a task ultimately. However, you should set store by your financial goals and then use them as the benchmark for finding the best annuity that suits your needs. Here is a handy guide for you.
1. Understand Types of Annuities
Various types of annuities are available these days, each of them tailored for helping you reach varying financial objectives.
- Fixed Annuities: The payouts are guaranteed with these annuities and they are suitable for more conservative investors who desire predictable income levels (minus market risks).
- Variable Annuities: Payouts may vary, based on the underlying investment performance. While containing the possibility of higher returns, they also carry much greater risk.
- Indexed Annuities: These are annuities tied to stock market indexes, enabling a fusion of potential for future growth and avoidance of risks alike. They also come with downside risks although they are not as predictable as fixed annuities as well.
- Immediate Annuities: With these, payments start coming in almost immediately after you buy an entire investment. This makes them perfect for immediate income seekers.
- Deferred Annuities: You can use these plans to make investments currently and take payments later on, thereby achieving tax-deferred growth on the way.
2. Assess Risks
Your appetite for risk is one of the key aspects for deciding which type of annuity will suit you best. If you want to avoid high risks, a fixed annuity may be more appropriate. A variable or indexed annuity, however, may attract higher returns for those who are willing to bear more risk.
3. Consider Retirement Needs
Annuities are often used to provide additional sources of retirement income aside from pension plans. Before choosing an annuity, add up your anticipated retirement expenses and decide how much in guaranteed annual pension you’ll need. If you want to cover the essentials, a fixed or immediate annuity may be more suitable. On the other hand, if there is room for flexibility and you are willing to take risks in exchange for better yields, a variable or indexed annuity might be the right thing to do.
4. Evaluate Payout Options
One annuity can have different types of payment plans, so make sure you select the one that meets your financial goals best:
- Lifetime Income: Offers an income for as long as you live, providing a sense of security that your savings will never run out.
- Period of Certain Time: Pays out over a certain number of years, which can be useful if you wish to guarantee money for a set period.
- Joint Life:Make sure you and your spouse both get income for as long as you live, so wives and husbands often use this mode of payment in order that they can enjoy dual security.
Conclusion
The right annuity for you involves understanding what kind of annuities are around, appraising your ability to face risks and then adjusting your investments, so it fits with your financial objectives. Only through careful calculation can you ensure security for the years to come and have peace of mind in every situation when new funds are needed.